Code JDMBA2b: August 2005

Saturday, August 20, 2005

My Largest Stock Holdings

Attention! The following is a copy of a recent post from my new blog JDMBA. If you hope to read more posts like these in the future, do not return to JDMBA2b. Instead please visit my new blog JDMBA and update all your links and bookmarks to reflect my new blog name and address. Thank you!

Currently my 5 largest holdings are SIFY, WZEN, NTES, SOHU and SINA. Since I mainly talk about Chinese stocks on this blog, I have not spoken as much about SIFY and WZEN.

SIFY is an internet, network and ecommerce company in India. Currently most of their revenues come from corporate data and network services. Retail internet access is the next largest revenue contributor. Other areas such as online advertising, ecommerce and WVAS are still very small but growing quickly. Here is a link to their most recent quarterly report. According to Alexa, Sify is currently the 6th most popular website in India. It should be noted that Rediff, the 3rd most popular site according to Alexa, is also publicly traded on the NASDAQ under the ticker symbol REDF.

Sify is the clear leader in two areas, corporate network services and the operation of Internet Cafes or I-Ways in India. I see continued growth in both areas. In addition to further growth in their corporate networking, internet access and I-Way businesses, I am excited about Sify's potential growth in WIFI, VOIP, WVAS and Online gaming areas. Recently launched Sify Max, should be a positive for their fast growing shopping and WVAS business. The I-Way business currently has about 3000 internet cafe's (most of which are franchised). I see this as an excellent platform for a rollout of a MMORPG and Casual Games business in India. A3 licensed from Actoz is the MMORPG currently being promoted by SIFY.

Recent news for SIFY includes a ruling by the TRAI on ISP entry fees and licensing fees for offering VPN services. "VPN is a leased-line based service used by large corporate houses and retail chains to link up their offices across the country on a common network." As broadband rates continue to fall in India, broadband ISPs such as Sify Broadband will continue to benefit at the expense of (sometimes more expensive) dial up providers. Several years ago 3 companies (SAIF, SARF and Venture Tech) purchased SIFY shares at extremely low prices. All three have been selling SIFY shares over the last few years as prices have increased. Based on SEC filings I think no longer think SARF is a beneficial owner. SAIF (SOFTBANK ASIA INFRASTRUCTURE FUND) sold lots of shares over the last few days as prices increased on large volume. This heavy selling pressure from SAIF is likely one of the primary reasons why REDF outperformed SIFY by such a wide margin this week. As SAIF and Venture Tech run out of shares to sell, I believe the downward pressure on SIFY shares will lessen and SIFY will be ready for a large price run-up as it approaches profitability in the near future.

WZEN is a far less diversified business than SIFY; it is primarily a pure play MMORPG business based in Korea. Right now ALL of its revenue essentially comes from one game, MU. Earnings will likely continue to become weak until its next MMORPG is commercially released. It appears that its next game SUN will enter closed beta testing on September 27th. You can find further comments of mine about WZEN here. For anyone who is interested in investing in WZEN I HIGHLY recommend you visit their website and download trailers for their upcoming games. For my impression of which games will be successful in specific regional markets look here. I am most excited about the prospects of SUN, Huxley and APB. Since MU is rapidly aging, an investment in WZEN is largely a bet on the future success of upcoming games. Of course their huge cash position (Warning! Yahoo Finance Key Statistics are often not up to date. Always look at the most recent SEC filings and balance sheets for current data) is also very attractive!

My most recent comments on NTES can be found here. In my opinion, recent profit taking in NTES may be another good buying opportunity for those interested in initiating a long position in NTES. I think it is likely that even the highest analyst estimate for 2006 could prove to be too conservative. I felt that NTES would exceed 2Q 2005 analyst estimates and turned out to be right (actually the results were even better than I thought!). Since most Netease revenues come from online games lets hope that I am correct in forecasting Da Tang and Tian Xia Er and casual games revenues ahead of analyst estimates for 2006. I recommend reading this recent post by CoolHeadInvestor on NTES.

My most recent comments on SOHU can be found here. Recently there has been a traffic decrease for Sogou on Alexa. It is too early to know the cause for sure. Perhaps there is an error at Alexa, or perhaps Alexa corrected a previous error. Based on the recent page views per user increase, perhaps one of the more inefficient Sogou referral sources (in terms of page views per user) stopped directing traffic to Sogou. I recommend keeping an eye on Alexa data. I feel pretty good about Sohu right now after recent insider purchases.

My most recent comments on SINA can be found here. I recommend listening for an announcement on what will happen to the 1pai joint venture with Yahoo after the Yahoo China/Alibaba deal. In my mind there are three possibilities:

1. Alibaba/Yahoo will purchase the remaining 1/3 ownership of 1Pai in order to gain full control. 2. Alibaba/Yahoo will leave 1Pai as is and Sina will continue to own 1/3 of the joint venture
3. Alibaba/Yahoo will merge 1Pai with Taobao in order to better compete with Ebay/Eachnet. Sina will be given an equity stake in the new Taobao/1Pai business (likely to retain the name Taobao).

I am hoping for the third option. Contrary to some people who think eBay will be successful in China, I think Alibaba will win. Meg Whitman and her team does not understand the local market as well as Jack Ma and his team and Alipay already has a good lead on PayPal.

Disclosure: I am long SIFY, WZEN, NTES, SOHU, SINA

Sunday, August 14, 2005

RSS Feeds for JDMBA

If you like my blog, you can now get automatic headlines as I publish them by adding JDMBA to your RSS feeds. Just click the "Feedburner", "My Yahoo", "NewsGator", or "My MSN" links on the right side of the page. Signing up is absolutely free. It will also help me monitor approximately how many regular readers I have.

Please sign up today!

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